The Idaho Department of Insurance is warning insurance producers that offering extra services outside of the insurance contract at no cost to clients or potential clients is a violation of state law. In recent months, the DOI said it has become aware of some producers, for example, offering value added services such as administration of a buy down program for an employer as a method of reducing the cost of the health insurance plan, COBRA administration, and human resource/employee benefit consulting.
“Idaho Code Section 41-1314(1) prohibits any person from directly or indirectly offering or giving as an inducement to purchase insurance “anything of value whatsoever” that is not plainly specified in the insurance contract. The code language indicates that for a violation to exist, the valuable consideration must be offered or provided as a rebate or inducement to insurance. In other words, there must be some connection to an actual or prospective sale of insurance.
If goods or services not specified in the insurance contract are offered or provided as an inducement to purchase or renew insurance, then to avoid a violation of Section 41-1314(1) a reasonable charge must be imposed, the DOI advised. The charge should reflect the actual value of the service being provided and should not be less than the cost of providing the good or service. Services that fall within the traditional notion of “customer service” for which one would not normally expect an additional charge would not be considered by the Department to be a rebate or inducement in violation of Section 41-1314.
Examples of traditional customer services that would not be viewed as rebates or illegal inducements include offering a 24-hour hotline for claims, responding to questions or providing advice regarding coverage or benefits, maintaining loss runs, and issuing insurance cards.
Since July 2006, the Idaho Code was amended to permit producers of life, property and casualty insurance the ability to offer to actual or prospective policyholders goods (but not services) as long as the goods do not exceed an aggregate value of $50. Yet the DOI warned that it is important to note that the $50 exception to the rebate law does not apply to health insurance or other types of disability insurance, and it only applies to goods, not services.
The DOI is warning insurers and producers to carefully review their policies and marketing efforts, as it will investigate complaints concerning violations of Idaho Code Section 41-1314 and will take administrative actions to assure compliance when appropriate.
For information, contact the Department’s Consumer Affairs Section at 208-334-4250.
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